Economy fears, carbon tax prove toxic for PM

Fears in the business community that federal political factors are undermining confidence and threatening the economy are set to intensify, with new doubts emerging about Prime Minister
Julia Gillard
’s grip on the Labor leadership.

The first major opinion poll to be taken since the government announced the details of its carbon tax – the Nielsen poll published today in Fairfax newspapers – confirms Labor fears that the government’s support languishes at record low levels and that the Prime Minister’s standing with the electorate ­continues to deteriorate.

Although Ms Gillard has warned Labor colleagues they should be prepared for continuing bad polls until voters have come to a better understanding of how the carbon tax will work – and how it will affect their own circumstances – a toxic mix of worrying economic news and political uncertainty are contributing to growing fears in Labor ranks about the viability of her leadership.

Growing concern about the outlook for the economy amid intensifying international uncertainty has raised the stakes for Ms Gillard and made even more relevant to Australia the deepening sovereign debt crisis in Europe and the budget stand-off in the United States.

Ms Gillard and Treasurer
Wayne Swan
used media appearances yesterday to counter the sudden burst of pessimism about the economy, escalated at the weekend by a warning from Westpac’s chief economist,
Bill Evans
, that Australia was going to be hit harder by global economic problems than has been understood.

Both the Prime Minister and Treasurer insisted the economy was in fundamentally sound condition and would continue to outperform much of the rest of the developed world, because of the strength of the Chinese economy and the huge pipeline of resources investment linked to demand from the region.

Their attempt to counter the negative sentiment came as a significant voice in the business community,
Heather Ridout
, expressed serious concern about the timing of the introduction of the carbon tax.

“The timing could not be worse," said Ms Ridout, chief executive of the Australian Industry Group. She compared the government’s focus on the carbon tax with the criticism made of US President
Barack Obama
for focusing on healthcare reform and paying too little attention to the deteriorating health of the US economy as the global financial crisis took hold.

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“I think Obama in his first term was hellbent on doing health reform but he would have been better focusing on jobs and do health after he got that fixed," Ms Ridout said. “I think timing is everything on these reforms. We have had two shots at carbon and this is the third one, and the timing could not be worse."

She said there was a “very disconnected debate" about the state of the Australian economy, and the lack of confidence in the community was giving a very different picture to the official figures.

Ms Ridout said the carbon tax would add a significant burden to already pressured businesses.

But Ms Gillard and Mr Swan flatly rejected the argument that now was the wrong time to be introducing the tax.

“The time for action is now," Mr Swan said “The more we delay, the more costly it is for the nation. We have to make this change.

“Yes, there are challenges in the global economic outlook.

“We are seeing uncertainty in Europe and we are seeing weaker growth in the United States . . . but our region remains strong, the fundamentals underlying our economy are strong."

Mr Swan blamed the opposition for undermining economic confidence, saying it was “scaring the pants off consumers".

Ms Gillard and Mr Swan said they believed that public attitudes would improve once the carbon tax was better understood. They defended the government’s $25 million public information campaign, which began on TV last night.

Opposition Leader
Tony Abbott
accused the government of using taxpayer funds for “propaganda" and said the Labor Party should pay for the ads. Mr Abbott was greeted by an enthusiastic crowd as he campaigned in Sydney – an obvious reflection of his improving standing as preferred prime minister.

Senior Labor sources said last night they believed the Caucus would not “panic" at more bad poll news. They said there was a collective view a reasonable period of time should be allowed for the public to come to understand the package and for the polls to begin to turn.

Views differ on how long this period should be but one senior MP said it would be an uneasy Caucus which meets when Parliament resumes in mid-August if the polls are as bad, or worse, than they are now.